Millennial buyers know what they want, stick to their budget
Millennials account for 43% of home buyers, but their preferences and approach to buying differ from previous generations.
- Affordability is a barrier for many millennials, compounded by rising mortgage interest rates.
- Flexible spaces, home offices and energy efficiency are common asks.
- While millennials want to own homes, they are willing to delay their purchase to avoid sacrificing travel and other lifestyle expenses.
Millennials – defined as those 23 to 41 years old in a recent NAR report – now account for 43% of home buyers according to research from the National Association of Realtors. That's the most of any generation, and it's up from 37% of buyers in 2020. While those numbers may seem high, affordability is still a roadblock for many in this demographic. Housing demand continues to exceed supply, home prices have outpaced wages, and millennials are often saddled with student loan debt.
Dana Palmer, an agent with The Lenard Team at Signature Premier Properties in Long Island, New York, says money is generally front and center in discussions with her millennial clients. "A lot of them are super stressed about finances," she says. "They budgeted for 2.5-3% interest rates, and now rates have doubled and it's a big deal for them. I've had buyers who have been looking for their dream home for ages and when interest rates went up, they just gave up."
A spring 2022 Bankrate survey found that many younger Americans, including 69% of millennials surveyed, were willing to make sacrifices in order to buy a home, including relocating to a different state, moving to a more affordable but less desirable area or buying a fixer-upper. That's something Palmer has seen firsthand. "Millennials buying their first home are often willing to do some work on the property if it means getting a decent deal in a good location," she says.
Andrea Geller, an agent with Berkshire Hathaway HomeServices based in Glenview, Illinois, says many of her millennial clients are coming in with down payments of 20-30%. "With previous generations, the minute a person had saved 3-5%, they were buying their first condo or small property. My millennial clients are more focused on the long term and on quality of life. They want to know what their monthly payments will be so they can save for retirement, take vacations and live the lifestyles they want."
Timothy Downes, an agent with eXp Realty in Roseville, California, often hears from his millennial clients that they're tired of "throwing their money away" on rent. And, while he still sees buyers who are scrimping and saving to come up with a down payment and closing costs, he's also working with Silicon Valley millennials who are able to buy with all cash.
While all three agents say it's hard to generalize about millennials, they agree that the home features once considered must-haves for Gen X and boomer buyers are not as attractive to millennials. These younger buyers tend to shun large, ornate, suburban homes in favor of homes with flexible spaces that are close to restaurants, shops, gyms and parks. Energy efficiency is often a priority. Home offices are preferred over formal dining rooms or formal living rooms.
"These buyers typically don't have the same attachment to 'things' that their parents and grandparents had," says Geller. "They're not packing up and moving grandma's china or dining room table. They're focused less on finding a space to hold their treasures and more on a space that fits their needs and budget. They'll buy new furniture once they get settled."
Palmer concurs. "I have millennial clients who don't even want to see the attic space. They just don't seem to have as much stuff. Storage is not a make-or-break for them."
Downes has clients who not only forgo a glimpse of the attic, but who are willing to buy sight-unseen. Two of his most recent millennial buyers never stepped in their new homes before signing the papers. "They're busy and they know inventory is low, so they're buying off what I tell them and a virtual walkthrough."
"I see other agents who get frustrated by millennials, but I try to simply embrace what makes them different," says Geller. "They tend to know what they want, and they don't want to spend at the top of what they've been approved to spend on housing. They want to be able to afford life beyond their house, which is actually pretty wise."